Rates hold a partial release of the pressure valve for small business

Rates hold a partial release of the pressure valve for small business

Small and family businesses have received a welcome reprieve from the Reserve Bank’s aggressive monetary tightening campaign following today’s decision to hold the cash rate at 4.1 per cent.

Despite the decision to hold steady, the bank has signalled that it may continue to squeeze Australia’s economy further as it works to bring persistently high inflation under control.

“The RBA’s decision to leave the cash rate on hold will act as a partial release of the pressure valve for Australia’s 2.4 million small businesses,” ACCI chief executive Andrew McKellar said.

“The Reserve Bank has rightly kept the cash rate steady, giving it more time to assess the impact of its efforts to dampen economic activity.

“After experiencing 12 interest rate increases, declining consumer spending, and a surge in input costs, small and family businesses are being brought to their knees.

“To add to the pain, many struggling small businesses have seen their wages bill soar from July 1 as the annual wage review and increase to the superannuation guarantee have taken effect.

“While wages growth across the board remains within the central bank’s target range, the risk is that the Fair Work Commission’s determination becomes a floor for wage negotiations across the economy, thus unlocking the floodgates to deep and prolonged economic pain.”

The latest consumer price index data, released last week, revealed a significant deceleration in annual inflation despite the continuation of persistent price pressures in many sectors. Similarly, while the labour market has lost some momentum, it remains incredibly tight.

“Inflation is clearly easing, but much more progress will be needed to bring core inflation to levels that align with the Reserve Bank’s broader target range,” Mr McKellar added.

“To help curb inflation, continued discipline on public spending and tax policy from federal and state governments is required.

Inflation retreat will bring some comfort to small business

Inflation retreat will bring some comfort to small business

Fresh inflation numbers released today will offer some consolation to Australia’s 2.4 million small business owners, many of whom are nearing breaking point as price pressures and elevated interest rates increase the risk of further economic pain.

“After experiencing 12 interest rate increases, declining consumer spending, and a surge in input costs, it’s good news for small businesses that inflation is returning to its downward trend,” ACCI chief of policy and advocacy David Alexander said.

“As supply chain bottlenecks ease, small businesses have experienced a decline in petrol prices while material costs have also steadily decreased from previously high levels.

“Despite this welcome progress, the expected inflation-chasing wages hike from July 1 will heap even more pressure on small businesses when they can least afford it.

“Many small businesses are seeing their costs rise to the point where they have no choice but to increase their prices to maintain operations.

“With further disruption on the horizon as the federal government pursues retrograde changes to the industrial relations system, small businesses across the country are questioning why laws that will make it harder to create new jobs and grow the economy are needed.

“At its meeting next week, the Reserve Bank should take stock of whether rates are sufficiently restrictive to bring inflation back to target.

$12.6 billion wages bill to slug small business

Today’s decision by the Fair Work Commission to increase award wages by 5.75 per cent and minimum wages by 8.6 per cent will slug small and family businesses, already encumbered by soaring costs, with a $12.6 billion wages bill.

Taking account of the 0.5 per cent increase in the superannuation guarantee from July 1, this represents a significant burden for small business, and risks unlocking the floodgates for deep and prolonged economic pain.

“Today’s decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages,” ACCI chief executive Andrew McKellar said.

“The Fair Work Commission has made a dangerous choice to chase after the supply-side inflation shock that we are experiencing. An arbitrary increase of this magnitude consigns Australia to high inflation, mounting interest rates and fewer jobs.

“Businesses in the accommodation, food, construction, manufacturing, and retail sectors have experienced falling profits over the past two years. The reality is many of the small and family firms in these industries will be unable to absorb this extra cost without raising prices.

“The commission has disregarded the message it conveys to the wider labour market and the influence it holds over entrenching high inflation as the Australian economy faces a worsening outlook in the years ahead.

“A 5.75 per cent increase will make the job of the Reserve Bank more difficult to control ongoing inflationary pressures, inflicting pain on families and small business when they are already down to the wire.

“In our submissions to the annual wage review, ACCI proposed a fair and responsible increase of 4 per cent that aligned with efforts to contain inflation and return it to the Reserve Bank’s target range.

*An earlier version of this release incorrectly referred to the increase in minimum wages as 5.75 per cent.

Small business sector welcomes energy efficiency incentives

Small and medium-size businesses suffering from energy bill shock are set to receive support to undertake electrification and efficiency upgrades through targeted tax incentives in the upcoming May budget.

The Australian Chamber of Commerce and Industry, and its 400,000-strong small business network, has welcomed the $314 million energy efficiency scheme announced by the federal government today.

Under the scheme, set for the next financial year, small and medium-size businesses with a turnover of up to $50 million will be able to claim an additional 20 per cent tax deduction on investments of up to $100,000 in electrification and energy efficiency.

“Small businesses across the country have seen their gas and electricity bills skyrocket in the past 12 months, so any relief to reduce soaring energy costs is welcome,” ACCI chief executive Andrew McKellar said.

“Small business owners recognise the importance of transitioning to net zero, but often face challenges in taking the first steps in making meaningful progress towards reducing their carbon footprint.

“There are huge opportunities for small businesses to go green, not just to contribute to the cause of combating climate change, but also for businesses to grow and ensure their future competitiveness.

“Modest changes to improve energy efficiency and adopt more sustainable practices can set a business apart from its competitors, lure new customers and investments, and reduce operational expenses.

“Small and family businesses are the backbone of the Australian economy, so as we transition to a net-zero future it’s critical that they are supported to reduce their emissions and invest in clean energy.”